Starting with the rising interest rates for home loans, last week, we had anticipated banks to increase their fixed rates.
As the cheap fundings provided by the government through the Term Funding Facility comes to an end in June, banks have begun to increase their interest rates.
Another strong reason banks are increasing interest rates now is because they no longer see a threat of recession due to COVID-19.
When COVID-19 peaked in Australia, banks had lowered their interest rates, and there was an increase in borrowing. The increased borrowing then has now led banks to report record profits and lending numbers. It means the time has come in the cycle for rates to rise.
On one hand, banks are pushing cheap rate home loans to utilize the remaining fund in the Term Funding facility. Meanwhile, on the other hand, few major banks have already increased some of the interest rates they provide.
National Australian Bank (NAB) and Macquaire are two major banks that have increased their interest rates on some of their home loan products. Experts predict that more hikes are to come, first by banks then by other lenders.
Now, coming to property prices subjected to a further increase, the Grattan Institute points at Federal Budget 2021 as the fuel. It claims that the measures announced were aimed at further increasing the demand and not the supply. Grattan is very vocal about Australia’s overcomplicated land supply issues and the lack of support for new stock.
The Director of Household finances at Grattan publicly spoke on how the budget not including substantial measures to improve housing affordability was a great miss. And that, schemes forwarding housing demand were wrongly stressed upon which will further increase the already spiking property prices.
What does this mean for borrowers?
The rising interest rates and property prices are bad news for the borrowers. Those who see the pattern of banks slowly increasing their interest rates and the federal budget starting to fuel property price hike, even more, they know now is the right time to get their home loans approved quickly. The more you wait, the more likely you pay for increased interest rates and property prices.